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HomeMy WebLinkAbout83-006 MillerStanley A. Miller, Commissioner Department of State Bureau of Professional and Occupational Affairs Harrisburg, PA 17120 May 24, 1983 STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120- OPINION OF THE COMMISSION Re: State Real Estate Commission, Inspection Trips Dear Commissioner Miller: I. Issue: 83 -006 You ask whether members of the State Real Estate Commission can accept reimbursement from a developer for expenses related to members' public responsibilities. II. Factual Basis for Determination: As Commissioner_of the Bureau of Professional and Occupational Affairs with jurisdiction over the Pennsylvania State Real Estate Commission, hereinafter the Real Estate Commission or Commission, you submit a question to us in relation to the activities of the members of the Real Estate Commission. You indicate that the members of the Real Estate Commission are appointed by the Governor and receive a $30 per diem allowance for the time that they attend meetings or perform other services on behalf of the Real Estate Commission. By law and regulation, one of their tasks is to perform investigations required under Section 19 of the Commission's rules and regulations. Section 19 of these rules requires that when any promoter of properties located outside of Pennsylvania proposes to sell such properties to Pennsylvania citizens, the promoter must submit to the Real Estate Commission, for its approval prior to such sales, the full particulars regarding the property, the proposed terms of sale, etc. These rules state that all expenses reasonably incurred by the Commission in conducting such an investigation "shall be borne by the applicant ". When an applicant files a statement of particulars regarding the out -of -state property proposed for sale and the conditions of such sale in Pennsylvania, the application is referred, usually on a rotating basis, to one of the members of the Commission for investigation. As part of the investigation, that Commissioner travels to the place where the real estate is Stanley A. W'ller May 24, 1983 Page 2 located and makes an inspection o'its quality, the reputation of the promoter, the terms of sale, and all other factors that enable him to make a judgment as to whether the offee is fair and all the relevant facts have been disclosed to the proseective Pennsylvania purchasers. This Commissioner, at the site of the property, beets the developer, the developer's c5unsel and any other persons in the community who can furnish information concerning the real estate proposal and /or the reputation of the developer. Such inspections usually last between; three and days. When the inspection is complete, the ',;wmissioner files his report with the Real Estate Commiss'?on. The developer is then blled directly by the Commonwealth for the per diem fee of the Commissioner but the inspecting Commissioner himself bills the developer for his out -of- pocket expenses for transportation, etc. associated with the inspection. You note that the Governors' Board of Ethics issued Opinion No. 26 (December 18, 1978) as to the travel - expense question you raise and found that the direct reimbursement procedure did not violate the Code of Ethics then in effect. In addition, following the submission of the Commissi - eier's report, it is clear that the Commissioner who made the inspection not only participates in the voting for approval or disapproval of the out -of -state land promotion, but also usually makes the motion for approval or disapproval of the application. III. Applicable Law: The law to be applied to this question is as follows: Section 1. Purpose The Legislature hereby declares that public office is a public trust and that any effort to realize personal financial gain through public office other that compensation provided by law is a violation of that trust. In order to strengthen the faith and confidence of the people of the State in their government, the Legislature further declares that the people have a right to be assured that the financial interests of holders of or candidates for public office present neither a conflict nor the appearance of a conflict with the public trust. Because public confidence in government can best be sustained by assuring the people of the impartiality and honesty of public officials, this act shall be liberally construed to promote complete disclosure. 65 P.S. 401, Stanley A. Miller May 24, 1983 Page 3 IV. Discussion: Section 3. Restricted Activities (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. 403(a). (b) No person shall offer or give to a public official or public employee or candidate for public office or a member of his immediate family or a business with which he is associated, and no public official or public employee or candidate for public office shall solicit or accept, anything of value, including a gift, loan, political contribution, reward, or promise of future employment based on any understanding that the vote, official action, or judgment of the public official or public employee or candidate for public office would be influenced thereby. 65 P.S. 403(b). The members of the Real Estate Commission are clearly "public officials" as that term is defined i'n the Ethics Act, See 65 P.S. 402. Thus, their conduct must conform to the requirements of the Ethics Act. We note our ruling is limited to the requirements of the Ethics Act. We note that an Advisory Opinon No. 26 was issued under the Code of Ethics for the Executive Branch but do not consider the Opinion binding or dispositive as of the requirements of the Ethics Act, which as listed above, are at least in some respects, clear. We note that it is eminently clear that the Commissioner who views the property at the developer's site must be particularly conscious of the requirements of Section 3(b) of the Ethics Act. Such a Commissioner, of course, may not accept anything of value, including transportation expenses, entertainment allowances, meal allowances, etc., on the understanding that that Commissioner's official conduct would be influenced thereby. We expect that this provision of the Ethics Act is observed. However, as you indicate, the mere fact that this "billing" by the Commissioner to the developer of out -of- pocket expenses occurs might give rise to an appearance of an impropriety insofar as it might appear that the financial interest of the Commissioner in securing this reimbursement might Stanley A., Miller May 24, 1983 Page 4 conflict with the public interests with which he is entrusted as a Real Estate Commissioner. We had previously noted that a Mayor, for example, in his official capacity, may perform all the functions required of that office, including undertaking trips and accepting gifts that might be offered in conjunction with official trips without violating the provisions of the Ethics Act. See Rosenfeld, 82 -010. However, in that Opinion we were dealing with a situation where it was also understood that any costs incurred were paid in advance by the host and any "gifts" that were received by the Mayor.in his official capacity were to be turned over and retained by the public body that the Mayor was representing. In the situation you present, quite the opposite appears to occur. Specifically, the Commissioner deals directly with the developer in the "billing" of his out -of- pocket expenses and your facts do not indicate that the Real Estate Commission or your office is at all involved in reviewing, assessing, or insuring the reasonableness of this "bill" or the amount reimbursed by the developer to the Commissioner. Thus, it seems to us that this situation is bound to give rise to an appearance of a conflict insofar as the Commissioner is dealing directly with the developer without any review or check by the Real Estate Commission or your office. The public will perceive that the objectivity of the - Commissioner whu has just billed the developer directly in a completely unchecked manner would at least oe affected and possibly impaired. Likewise, it seems clear that if these trips and expenses, including transportation and other expenses for which the Commissioner bills the developer directly are, in fact, incurred in the exercise of the Commissioner's official responsibility with the Real Estate Commission, the Real Estate Commission should either pay for these expenses itself and seek reimbrusement from the developer or at least oversee their reimbursement. Such a process would eliminate any possibility that a developer could offer to reimburse a Commissioner in an excessive manner in order to influence, even indirectly, that Commissioner's impression of or acceptance of the developer's project. Indeed, it would seem to us that the Commissioners involved in such a process of billing the developers directly are placed in a particularly precarious position of having to discern for themselves which expenses for transportation, etc., are to be billed and the amounts thereof. We would not wish to see the Real Estate Commissioners expending monies of their own to perform public functions or not being properly reimbursed for monies so spent, but, your office has apparently not provided any guidelines to us or to the Commissioners in this regard. The Commissioners, however, should not be placed in the kind of direct reimbursement position vis -a -vis the developer whose projects they must judge impartially if an alternative is available. The Real Estate Commissioners, without precedent, guidelines, or directives from your office should not be required to or able to decide which expenses and amours should be billed to the developer whose project he is going to be asked to review. Stanley A. Miller May 24, 1983 Page 5 V. Conclusion: It is also possible that upon reconsideration of the current procedure you might be able to develop and adopt a system of application fees to be paid by prospective developers who wish to have their projects reviewed. Such fees could be paid into a general fund specifically reserved for the reimbursement of the Commissioner's travel and transportation expenses. Developers could then expect that the Real Estate Commission itself would have charge of the money, that the reimbursement for expenses of a travelling Commissioner would be paid in accordance with current Commonwealth reimbursement standards or other standards developed by your Office and that no developer would be able, therefore, to secure "advantage" by providing a travelling Commissioner with reimbursement for expenses which would be substantially different from those expenses that would be billed, paid, or payable by another developer. You also ask whether the Commissioner who has travelled to the site for the inspection should be disqualified from participation in the vote or approval or disapproval of the out -of -state land promotion. It is obvious that such a Commissioner has already, appropriately and as required, provided the members of the Real Estate Commission with a report of his on -site inspection. It would therefore, be inappropriate for him to be disqualified from participation in the voting procedure. The fact that he has travelled to the site would not disqualify him, per se, because it is specifically the insight that he has gained during such an on -site inspection that is apparently required by your own law and regulations and desired by the Commission. However, if,a particular Commissioner feels that he has lost the objectivity which he must maintain, by virtue of the fact that he has conducted the on -site inspection, he should certainly feel free to disqualify himself from the actual voting and the Commission's review of the project. However, to automatically disqualify this Commissioner from such a process would be to obviate the exact reason for expending monies to secure the on -site inspection in the first instance. Of course, no Real Estate Commissioner could accept reimbursement for expenses or any other thing of value on the understanding that his official conduct would be influenced thereby. However, in the present situation, whereby a Commissioner bills a developer directly for expenses related to the on -site inspection process described above, it is inevitable that the appearance of a conflict of interest would arise. Accordingly, we suggest that your office take the steps necessary to remove the Commissioner who must travel to conduct an on -site inspection from the precarious position of having to deal directly with the developer to secure reimbursement for his out -of- pocket expenses. Further, we suggest that such expenses be standardized and conform if possible to an objective standard to insure the Stanley A. Miller May 24, 1983 Page 6 t comparability of each travelling Commissioner's expenses. This system will preclude the possibility that one developer can provide a travelling Commissioner with expenses which would far exceed the expenses paid to another particular travelling Commissioner and eliminate the possibility that one developer can provide inappropriate or inordinate accomodations /reimbursement. It is also suggested that:you study the possibility of having the developer who seeks such on -site inspections pay an application fee.into a pool cf funds which would be maintained and disbursed through the Commission's offices for the execution of the Commissioners' official duties, including these on -site inspections. Removing the direct payment between the Commissioner and the developer, the standardization of the amounts paid to the travelling Commissioner, and the possibility that the developer - applicant would pay fees into a general fund from which the travelling Commissioner's expenses would be paid are all suggestions which would remove any appearance of any conflict in these circumstances. We make these suggestions only to illustrate the type of solutions which would eliminate the appearance of a conflict of interest. We recognize that your office has the responsibility for the design and implementation of the system. Finally, it would be neither practical nor productive to require the travelling Commissioner to remove himself from reporting, discussions, or votes, related to the on -site inspection which he undertook as part of his official responsibilities. However, to assure that these circumstances "present neither a conflict nor the appearance of a conflict with the public trust,", a Commissioner who has dealt directly with a developer to secure reimbursement for his out -of- pocket expenses should refrain from finally voting to approve /disapprove the project of said developer. In addition, generally, should any particular Commissioner feel compelled, following such an inspection, to remove himself, because he feels he cannot objectively review the questions presented following such are iinspection, he should, of course, remove himself from such a case. Pursuant to Section 7(9)(i), this opinion is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any civil or criminal proceeding, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance of the advice given. This letter is a public record and will be made available as such. Stanley A. Miller May 24, 1983 Page 7 Finally, any person may request within 15 days of service of the opinion that the Commission reconsider its opinion. The person requesting reconsideration should present a detailed explanation setting forth the reasons why the opinion requires reconsideration. By the Commission, .4h AUL J. SMITH Chairman SSC /na